Monday, August 29, 2011

Since writing this blog post more than two years ago asking for updates on real estate gurus Hal Morris and Tony Hoffman, I've received a steady trickle of information about both.

Paul in Idaho sent me this clip of Morris on YouTube at a celebration for real estate guru Joe Land. Although it is unclear from the video or others posted by the same author on the site, I believe Morris and the others are at a funeral celebration for Land.

Ironically, the Joe Land "60 Minutes" segment Morris mentions during the video is the notorious March 16, 1986 episode titled "Nothing Down" where guru John T. Reed debated Land on the subject of get-rich-quick real estate. This segment was a disaster for Land who publicly refused to give correspondent Morley Safer any of the addresses of his money-making deals.

I am very happy to see Hal Morris still in good form. I have fond memories of his early 1980s infomercial series called MONEY MONEY MONEY where he would interview fellow gurus and let them pitch their real estate home study courses. The production values of this late night show were so poor that Morris as a late night host made Joe Franklin look like Johnny Carson. I would enthusiastically tune in whenever the Morris show was on just to see what train wreck might occur, like the day a piece of the set fell down and no one noticed.

My favorite regular guru on the show was Tim Taylor, who sold a 10-cassette tape home study course called The Credit Card Millionaire System. His advice was for people to get lots of VISA and MasterCards, literally hundreds of them, and use them for cash advances to buy real estate.

The image of a guy walking into a bank with a shoebox filled with credit cards and then paying for a home with 200 $500 cash advances is as silly as it sounds. But Taylor and Morris played the sales pitch just right. I wonder how successful the home study course really was? Taylor's system was sold in the middle 1980s but in 2006 would a bank give a person even one hundred VISA cards?

Google the words "stab" and "Seattle" and you get more than 3,000,000 results.

This past Sunday, August 21, a tourist visiting Seattle with his family was stabbed by a homeless man after a confrontation on a city bus. The stabbing took place at the notorious Seattle intersection of Third Avenue and Pine Street in the heart of the city's shopping and hotel district, just four blocks away from Pike Place Market. And it took place in the middle of the day when the streets around this corner are filled with tourists, shoppers, and kids.

Realize all this crime is not taking place in some poor urban wasteland, a war zone neighborhood filled with poverty and decay. Downtown Seattle from Pioneer Square to the Space Needle IS the city's urban core, filled with dozens of hotels, nightclubs, restaurants, shops, and some of the largest department stores you can imagine. $1 million condos are common. Rents for a one bedroom range from $1,100 to $4,500 or more per month.

Here is the intersection where this stabbing took place, Third and Pine.

Downtown Seattle is home to huge theaters like the Paramount, 5th Avenue, and Benaroya Hall that host millions of visitors each year for everything from music concerts to stage productions.

So when a tourist gets stabbed, especially in the middle of the day and especially in front of his family, on a beautiful Sunday afternoon, at an intersection where people seem to get routinely stabbed but nothing every changes but the victim's names, people begin to notice.

Tourists may not come to Seattle based on the TRUE perception the downtown core is not safe, especially at night. Far too many visitors to Seattle today takes home horror stories associated with their visit. Read some of these comments left on travel boards.

When a tourist to Seattle gets murdered, which seems inevitable based on what happened this past Sunday, the downtown core will become a ghost town. I remember the New York case of Brian Watkins, a young tourist who was murdered on a New York City Subway while going to the U.S. Open with his family in 1990. Tourism dried up in New York for a time, and Seattle will never have the bounce back effect of Manhattan. One senseless act of violence will cripple the city's tourist core, an area already back on its heels and suffering.

I am urging the Seattle political leadership to address an obviously dangerous and deteriorating situation.

Monday, August 22, 2011

I am getting a trickle of emails that ask "Is the bubble in gold prices about to burst?"

First, I would categorize the now eleven year old bull run in gold as a bubble market for the simple reason that gold has no intrinsic value other than its use as an industrial metal or in jewelry. Gold is not like wheat that can be eaten or oil that can burned for fuel. Gold bars just sit in bank vaults like Fort Knox looking pretty.

Corn you can burn for fuel. Soybeans you can eat. Gold bars make great paperweights.

So nearly all the gold market, aside from the few manufacturers who really need to fix gold prices, is pure speculation. The run in gold has been caused by the instability of the financial system (especially since 2008) and the increased demand for gold from investors worldwide but also the new middle class of China and India who love gold jewelry.

When will it burst? That is the magic question and there is no rabbit under my hat.

Right now all the fundamentals on gold look extremely strong and that is not a good situation here. It suggests a strong lack of confidence in the banking system and especially the governments that manage their currencies. The recent downgrade of the United States does not help matters at all.

So readers that followed my advice did not buy overpriced rental properties in 2005. They avoided the hyped up crazy money free-for-all and bought boring old gold and made a fortune.

So how's that "free" advice from the get-rich-quick real estate gurus working out for you today? Can't wait to rush back to another REIA meeting or hotel ballroom for another "free" lecture on making money buying rental homes from the guru masters?

I am proud of the advice I gave my readers on my websites, in my blogs, and through my newsletter and will continue to give all my fans worldwide the best information I can.

Others had other ideas on how to make money in real estate in 2005. So how are all those pre-construction condo flips and those lease options working out for you? Are you thanking the gurus that told you home prices never go down and that leverage can make you rich?

Last Friday in my personal finance blog, Thrift and Accumulation, I told investors to jump into the stock market rather than run. Those that followed my advice were rewarded with the sharpest snapback rally in decades. Today, the volatility is so sweet that most traders are in heaven.

If the trend is your friend, recent trends have made you Big Man on Campus. It is virtually impossible not to identify a long or short candidate and follow the rainbow to a big pot of gold. No pun intended, but here is the one-month chart on gold prices. So how are those rental properties you purchased in 2008 and 2009 working out for you?

The Federal corporate income tax is an extremely inefficient tax that raises only about $330 billion per year. Completely eliminating the tax, including all the tax incentives, depreciation allowances, and the entire IRC devoted to corporations would cost ONE-THIRD of Mr. Obama's original stimulus package and just ONE-HALF of Bernanke's QE2. Only 12% of all Federal revenue comes from the corporate tax and as the chart above shows, the tax relative to GDP has been declining for decades.

Billions of expatriated profits would rush back into the United States for additional investment. Why hold profits in Bermuda or Panama when you can bring them home without paying a tax?

Companies would begin using equity again to make investments and capitalize their balance sheets instead of debt. Why should a tax code give an incentive to using debt over equity?

On this same note, eliminating the corporate tax instantly brings sanity to the taxation of dividends which have been double taxed at both the company and individual level for nearly a century.

Billions of dollars spent by companies large and small on tax avoidance can instead be used to build better products, give employees better compensation, and otherwise grow. One of the few groups that would be hit hard by my idea would be CPAs and accountants.

So would lobbying firms in DC that work to get all those tax loopholes for their clients. But these professionals will find much else to do in a world in generally increasing government regulation. Getting rid of all the sleazy K Street lobbying for depletion allowances, accelerated depreciation schedules, and other such arcane accounting nonsense removes lots of room for political corruption and would restore some confidence in the political process.

As you can imagine, the Rachel Maddow wing of the Democratic Party would howl with betrayal. Nancy Pelosi would be outraged by the rich not paying their fair share.

But most of America would not mind their crocodile tears. The unemployed would be working.

Corporate America would be enjoying record profits and Wall Street would be in a bull market lasting years.

The Office of Management and Budget and the U.S. Treasury would be reporting growing tax receipts and falling budget deficits.

And Mr. Obama would be re-elected to another four years in the White House. Unemployment could drop below 7% in just one year.

Republicans in the House would love my idea. The Tea Party would find it orgasmic.

With Mr. Obama behind it, an elimination of the Federal corporate income tax could be passed with just a few conservative Democrats crossing the aisle in the Senate.

Will this happen? Probably not. But why not is my question?

Cheap, fast, and deadly effective seem to be all good political reasons to do something right.

For the last month, Biden has been the point player on the debt ceiling talks, constantly making thunderous remarks about "tax breaks for the rich" much like Mr. Obama. But despite the fact the United States is more than $14 trillion dollars in the red and spends tens of billions of dollars EACH DAY it does not have, Biden still wants his rent money from the very people that will give their lives to protect him.

With all the clamor for "shared sacrifice" and "a balanced approach" to the deficit, shouldn't rich politicians like Biden who have suckled at the public tit for DECADES be the first to sacrifice? Yes, $66,000 is a drop in the fiscal ocean. But how many regular people had to work to pay that sum?

Joe Biden isn't just tone deaf, he's blind to modern political realities and how awful this situation looks to average taxpayers who are struggling in the worst economy in nearly eighty years, one Biden helped mismanage by the way.

Here is a photo of the Vice Presidential mansion. Can't free rent here make up for free rent on the cottage?